The Board dispensed with the reading of the September 13,
1999, Board meeting minutes. Mr. Lussier moved and Ms. Wustenberg seconded
the motion to approve the minutes as submitted. The following voted in favor:
Directors Aschkenasy, Hempel, Koch, Lehmann, Lussier, Richmond, Willis,
Wustenberg, and Imeson. Those voting no: none.

Dispensing with the reading of the September 17, 1999, Executive Committee
minutes, Mr. Imeson asked Executive Committee members if they had any
corrections. Ms. Wustenberg moved and Dr. Aschkenasy seconded the motion
to approve the minutes as submitted. Those voting in favor: Directors Aschkenasy,
Wustenberg, and Imeson. Those voting no: none.

Mr. Imeson highlighted issues discussed at the earlier meeting with
representatives from the OIT President's Advisory Council, saying that he
looked forward to future dialogue with that group.

New Board Members
Introducing the newest members of the Board, Shawn Hempel, Leslie Lehmann,
and Bill Williams (who was unable to attend), Mr. Imeson said that he was
grateful to have a full Board in place again. "Now we'll be able to conclude
some business that's been put off as a result of the delay in Senate
confirmations due to the lengthy legislative session," he observed.

Renewal Facilitator
Mr. Imeson introduced Dr. David Nygren, renewal facilitator. "I foresee us
beginning to develop further clarity on our priorities for the year, including
the specific roles for the Board, the Chancellor, and the presidents on issues
of accountability and collaboration versus competition within the new budget
and governance models. I also urge that we look at the kinds of things we
want to come back to in a year and say that we've completed what we started
at this meeting," Mr. Imeson shared.

E-Board Funds
Chancellor Cox stated that the Emergency Board recently released $5 million
to further support Engineering and Computer Science expansion.

Enrollment Growth
The Chancellor noted what appeared to be strong, Systemwide enrollment growth
of four percent or more, although exact figures had not been calculated.
OSU seemed to be experiencing the most growth, which was considered very
good news following a decade of fluctuating enrollments.

New Partnerships
Highlighting recent negotiations between SOU and Rogue Community College
pertaining to a jointly-leased or possibly jointly-purchased facility in
Medford, the Chancellor pointed out that entrepreneurialism is being realized
in all areas of the state

Asia-Pacific Conference
Chancellor Cox announced OUS' co-sponsorship of the Asia-Pacific Educational
Conference along with Waseda University in Tokyo. The conference was scheduled
from October 28-30 in Portland. Attendees include representatives from across
the Pacific Rim. Strong corporate support from Oregon companies was instrumental,
he said, in ensuring the success of the event.

SMILE and MESA Programs
One campus program that works with minority youth, SMILE (coordinated by
OSU), was recently singled out by President Clinton for special commendation,
reported the Chancellor. He also complimented the MESA program at PSU. Both
programs aim to guide minority youngsters toward careers in education, science,
and math.

AOI Proposal Follow-up
Prior to IFS President John Cooper's report, Chancellor Cox said that staff
have been working closely with faculty representatives in researching the
possibility of extending the System's educational employee benefits to spouses
and dependents. This resulted from a request made by the Association of Oregon
Faculties to the Board in December 1998. The Chancellor said that it was
recently reviewed by the Administrative and Academic Councils, with a review
by Presidents' Council forthcoming.

Presidential Salaries
Concluding his remarks, the Chancellor reported that work related to presidential
salaries was not yet completed. A first priority of the presidents, said
the Chancellor, was to address the faculty salary issue.

IFS Report
Following is an excerpt of IFS President John Cooper's remarks:

"The Institutional Faculty Senate had its regular meeting on the Eastern
Oregon University campus on October 1-2. We were greeted by Provost Bruce
Shepard and addressed by Gail McAllister, former OUS Board member. She argued
emphatically for the need for the System to continue as a system, pointing
to the successful result of the united lobbying of the last legislature.
Further, she thought the new budget model was useful in getting the legislature
to understand what we were doing and allowing institutions to serve their
distinctive missions. Ms. McAllister spoke to the value of performance measures
and she suggested they would continue to influence the budget process.

"We then had an interactive video conference with Vice Chancellor Anslow.
He summarized the budget for the biennium as applied to the new model, pointing
out the speed with which the new model had to be adopted. Mr. Anslow acknowledged
that the legislative mandate to serve all qualified undergraduate students
is in tension with the costs of graduate programs and graduate research.

"On the subject of faculty salaries, Mr. Anslow shared that in California
and Washington, faculty salaries are moving up faster than inflation and
faster than Oregon's. Classified salaries in the System are much closer to
the market than faculty and administrative salaries.

"Provost Shepard addressed us again to discuss how the new models are being
applied at Eastern. Eastern is the leader in the entrepreneurial approach
by providing distance education to one-third of its students. Because the
established programs produce revenue under the new model, Eastern is setting
up an investment fund for new initiative programs.

"On October 2, we had a lengthy discussion of the future relationship of
the System to individual campuses. We recognized the new budget model has
an inherently centrifical effect by giving a great deal more budgetary control
and responsibility to campuses. In many ways that seems like a positive
development. At the same time, it is a unanimous belief and a strongly held
belief, that the System needs to remain a system and not just a group of
autonomous campuses.

"I was given to understand this issue would be discussed by the Board and
I was instructed to convey to you our feelings on the issue. I do so with
a statement that I will read." (The statement is on file in the Board's office.)

The Investment Committee reviewed the Investment Objectives and Policy Guidelines
for the Oregon State Board of Higher Education Pooled Endowment Fund. The
Investment Committee, with the assistance of OUS staff and R.V. Kuhns and
Associates, then drafted a revised policy for Board consideration.

Since the Oregon Investment Council (OIC) has ultimate authority over all
state investments, any actions by the Board would need to be approved by
the OIC, as noted in the following Investment Objectives and Policy Guidelines.

The Investment Committee recommended that the Board approve for recommendation
to the OIC the following Investment Objectives and Policy Guidelines for
the OUS pooled endowment funds.

Final Draft Version

OREGON STATE BOARD OF HIGHER EDUCATION POOLED ENDOWMENT
FUND

Investment Objectives and Policy
Guidelines

I. INTRODUCTION

This statement governs the investment of the Pooled Endowment Fund (the "Fund")
of the Oregon State Board of Higher Education (the "Board") of the Oregon
University System ("OUS").

This statement is set forth in order that the Board, the Investment Committee,
its investment advisor, its investment managers, and others entitled to such
information may be made aware of the Policy of the Fund with regard to the
investment of its assets. This statement of investment policy is set forth
in order that:

1. There be a clear understanding by the Board, Investment Committee, and
staff, of the investment goals and objectives of the portfolio.

2. The Board and management have a basis for evaluation of the investment
managers.

3. The investment managers be given guidance and limitations on investing
the funds.

It is intended that these objectives be sufficiently specific to be meaningful
but flexible enough to be practical. It is expected that the policy and
objectives will be amended from time to time to reflect the changing needs
of the endowment; however, all modifications will be in writing and approved
by the Board.

II. OREGON UNIVERSITY SYSTEM POOLED ENDOWMENT FUND

The Oregon University System Pooled Endowment Fund (Fund) is a permanent
fund and is expected to operate in perpetuity, so these funds will be invested
long-term. It is important to follow coordinated policies regarding spending
and investments to protect the principal of the funds and produce reasonable
total return.

III. RESPONSIBILITY OF THE BOARD

The responsibility of the Board is to define and to recommend to the OIC
broad investment guidelines, selection of investment managers, and determination
or approval of asset allocation.

IV. INVESTMENT COMMITTEE RESPONSIBILITY

The Investment Committee serves as advisory to the Board and will have the
responsibility and authority to oversee the investments of the Fund. The
Investment Committee will recommend to the Board a specific asset mix reflecting
judgments as to the investment environment as well as the specific needs
of the Fund. Other advisory responsibilities of the Investment Committee
will include:

Recommending professional investment managers.

Negotiating and/or monitoring Fund investment expenses.

Monitoring the investments on an ongoing basis.

Assuring proper custody of the investments.

Reporting to the Board on a quarterly basis the Fund's investment results,
its composition and other information the Board may request.

Recommending to the Board the goal for maintaining purchasing power.

Recommending distribution per unit to the Board.

To assist in this process, the Board may retain a registered investment
advisor/consultant. The duties of this investment advisor/consultant are
described in Section X.

V. SPENDING POLICY

The amount of endowment return available for spending (distribution) is based
on a percentage of the average unit market value of the 20 quarters preceding
the current fiscal year. The distribution per unit (under Exhibit A) is
determined by the Board as recommended by the Investment Committee. The
distribution amount per unit is multiplied by the current number of units
and any additional units added during the current year as new endowment money
comes into the Fund. This shall be exclusive of investment management fees.

VI. INVESTMENT POLICY GUIDELINES

The Board does not expect the Investment Committee to be reactive to short-term
investment developments, recognizing that the needs for payout are long-term
and that investment competence must be measured over a meaningful period
of time. While the quantitative assessment of managerial competence will
be measured over a complete market cycle, the Board anticipates that the
Investment Committee will make interim qualitative judgments. Specific
qualitative factors which will be reviewed by the Investment Committee on
an ongoing basis include any fundamental changes in the manager's investment
philosophy, any changes in the manager's organizational structure, financial
condition and personnel, and any change, relative to their peers, in the
manager's fee structure.

A. Asset Allocation

The most important component of an investment strategy is the asset mix,
or the resource allocation among the various classes of securities available
to the Fund. The Investment Committee will be responsible for target and
actual asset allocation for the investments that will best meet the needs
of the Fund, taking into consideration the appropriate level of portfolio
volatility.

The risk/return profile shall be maintained by describing a long-term "target"
strategic asset allocation and is set forth in Schedule I of this Policy.

B. Investment Time Horizon

In making investment strategy decisions for the Fund, the focus
shall be on a long-term investment time horizon that encompasses a complete
business cycle (usually three to five years). Interim evaluation will be
required if a significant change in fees, manager personnel, strategy or
manager ownership occurs.

C. Statement of Derivatives Policy

A derivative is defined as a contract or security whose value is based on
the performance of an underlying financial asset, index, or other investment.
An investment manager shall not use derivatives to increase portfolio risk
above the level that could be achieved in the portfolio using only traditional
investment securities. Moreover, an investment manager will not use derivatives
to acquire exposure to changes in the value of assets indices that, by
themselves, would not be purchased for the portfolio. Under no circumstances
will an investment manager undertake an investment that is non-covered or
leveraged to the extent that it would cause portfolio duration to exceed
limits specified above. The investment manager will report on the use of
derivatives on a quarterly basis to the administrative manager.

VII. PRUDENCE, RESPONSIBILITIES AND CONTROLS

A. Prudence

All participants in the investment process shall act responsibly. The standard
of prudence to be applied by the Board, Investment Committee, OUS staff
responsible for the management of investments, and external service providers
shall be the "prudent investor" rule, which states: "Investments shall be
made with judgment and care, under circumstances then prevailing, which persons
of prudence, discretion and intelligence exercise in the management of their
own affairs, not for speculation, but for investment, considering the probable
safety of their capital as well as the probable income to be derived."

B. Ethics and Conflicts of Interest

Board members, Investment Committee members, OUS staff responsible for the
management of investments, managers and advisors involved in the investment
process shall refrain from personal business activity that could conflict
with the proper execution and management of the investment program or that
could impair their ability to make impartial decisions. These parties are
required to reveal all relationships that could create or appear to create
a conflict of interest in their unbiased involvement in the investment process.

VIII. INVESTMENT OBJECTIVES

The investment objective of the Fund is to seek consistency of investment
return with emphasis on capital appreciation over long periods of time, since
the Fund will operate in perpetuity. In keeping with the performance goals
included in the Policy, achievement of this objective shall be done in a
manner that maintains the purchasing power of the principal. The Investment
Committee shall set the goal for maintaining the purchasing power of the
principal value of the assets (under Exhibit A). Under no circumstance shall
the principal, as adjusted for inflation, be diminished.

IX. MANAGER(S) RESPONSIBILITIES

A. Legal Compliance

The investment manager(s) is responsible for strict compliance with the
provisions of the prudent investor rule as it pertains to their duties and
responsibilities as fiduciaries.

B. Evaluation Timetable

The manager(s) will be expected to provide to the OIC, State Treasurer's
Office, Board, Investment Committee, and their investment advisor/consultant
on a timely basis each quarter such data as is required for proper monitoring.
In addition, the manager(s) will provide to the investment advisor/consultant
transaction registers and portfolio valuations, including cost and market
data on a monthly basis.

C. Authority of Investment Manager(s) in the Managed Accounts

Subject to the terms and conditions of this Policy, manager(s) shall have
full discretionary authority to direct investment, exchange and liquidation
of the assets of the managed accounts. The Investment Committee expects that
the investment manager(s) will recommend changes to this Policy when the
manager(s) views any part of this Policy to be at variance with overall market,
economic conditions, and relevant investment policies.

The Investment Committee directs all managers to vote proxies and to vote
them in the best interest of the Fund. The managers will report to the Investment
Committee and their investment advisor/consultant at least annually as to
how proxies were voted.

Each investment manager is required to meet with the Investment Committee
and their investment advisor/consultant at least annually to review:

The investment forecast for the following year.

The effect of that outlook on the attainment of the Fund objectives.

The manager's actual results for the preceding forecast period compared to
the previously established return goal for the reporting period.

The Investment Policy, Guidelines and Objectives of the Fund. If it is felt
by the investment manager that the Policy is too restrictive or should be
amended in any way, written notification must be communicated immediately.

X. INVESTMENT ADVISOR/CONSULTANT RESPONSIBILITIES

Investment results will be monitored by an independent consulting organization,
under contract by the Board, on a regular basis and reported to the Investment
Committee as soon as practicable after each calendar quarter. A representative
of the investment advisor/consultant shall meet with the Investment Committee
to review for each manager (i) its past performance, (ii) compliance with
the Investment Policy, Guidelines and Objectives of the Fund, including but
not limited to asset allocation, actual return, and comparative return in
relation to applicable index (indices) and to a universe of comparable funds,
(iii) risk profile, (iv) ability of manager to fulfill the stated objectives
of the funds, and (v) any other material matter. A representative of the
investment advisor/consultant shall also report investment results, or other
information, to the Board, OIC and others, as requested by the Investment
Committee. Any noncompliance with the Investment Policy, Guidelines and
Objectives of the Fund or other section of this statement discovered by the
investment advisor/consultant will be reported to the Investment Committee
immediately.

A. Short-term cash will be invested in the Oregon State Treasurer's
Short-Term Investment Pool.

B. Fixed-income securities, for purposes of these guidelines, shall
mean mortgage-backed securities, U.S. government securities, investment-grade
corporate bonds, and other fixed income securities, such as certificates
of deposit and commercial paper. The objective of this component of the Fund
is to preserve capital in keeping with prudent levels of risk, through a
combination of income and capital appreciation. Realization of income will
be subordinate to safety, liquidity, and marketability (securities should
be readily marketable). This component of the Fund shall adhere to the following
categories:

Fixed-income managers have full discretion over the allocation between long-term,
intermediate, or cash equivalent investments, provided that the duration
of any manager's portfolio shall not exceed the duration of the Lehman Aggregate
Bond Index by more than one and one-half (1-1/2) years.

C. Equity securities are to be made primarily in well-established,
quality companies. The objective specific to this component of the Fund is
to maximize long-term total return through a combination of income and capital
appreciation. The restrictions pertinent to this portion of the Fund are
as follows:

Large-Cap Equity Requirements:
Not more than ten percent of the companies invested in should have market
capitalizations less than $1 billion (subject to the large-cap equity limitations
of Schedule I). Portfolios should be comprised of at least 30 security issues.

Small-Cap Equity Requirements:
Investments in smaller companies with market capitalization similar to the
Russell 2000 index (subject to the small-cap equity limitations of Schedule
I). Portfolios should be comprised of at least 30 security issues.

International Equity Requirements:
Investments in the equity securities of companies located outside the United
States are permitted (subject to the international equity limitations of
Schedule I). Portfolios should be comprised of at least 30 security issues.

D. Diversification

1. Not more than five percent of the market value of any investment fund
will be invested in any single issue, property, or security. This restriction
does not apply to U.S. Government-issued securities.

2. No investment in any single issue, security, or property shall be greater
than five percent of the total value of the issue, security, or property.

Performance expectations for each of the asset classes are described in Exhibit
A.

XII. OTHER INVESTMENTS

The Board and the Investment Committee recognize that the addition of other
investment classes may reduce total fund volatility.

The Board and the Investment Committee may, with the concurrence of the OIC,
place up to ten percent of the aggregate Fund assets in venture capital,
real estate, distressed securities, and oil and gas partnerships. This allocation
is to provide for portfolio diversification.

XIII. OTHER GUIDELINES AND REQUIREMENTS

Custodial responsibility for all securities is to be determined by the Board
or its designee(s).

XIV. CONCLUSION

Implementation of this Policy, including investment manager selection, shall
be the responsibility of the Investment Committee, subject to the necessary
approvals of the Board and the OIC.

This Policy shall be reviewed by the Board at least every two years.

SCHEDULE I
ALLOCATION OF ASSETS

The following represents target asset allocations and the ranges by asset
category.

Allocation of asset by class:

Class

Target Allocation

Ranges

Equity Category

70%

60%-80%

Fixed Income Category

25%

20%-40%

Cash

5%

0%-10%

Alternative Assets

0%

0%-10%

The allocation of equity assets shall be as follows:

Class

Target Allocation % of Equity

Ranges

Large-Cap Equity

65%

50%-75%

Small-Cap Equity

20%

10%-30%

International Equity

15%

10%-30%

EXHIBIT A

Performance Monitoring Return Expectations

Spending Policy

The distribution rate for the Fund is 5.0 percent of the five-year
moving average unit market value.

Total Fund

The total fund will be evaluated quarterly. Specific performance objectives
include, but may not be limited to, the following:

1. Exceed the level of inflation by 5.0 percent or more as measured by the
Consumer Price Index (CPI) over a market cycle;

2. Exceed the median fund in a universe of other endowments over a market
cycle. A market cycle is defined as an investment period lasting three to
five years.

U.S. Equities - Large Capitalization

Equity accounts will be evaluated quarterly. Specific performance objectives
include, but may not be limited to, the following:

1. Exceed the return of the S&P 500 Index by 0.25 percent (after fees)
over a market cycle; and

2. Rank at or above median of a nationally recognized universe of equity
managers possessing a similar style;

U.S. Equities - Small Capitalization

Small capitalization accounts will be evaluated quarterly. Specific performance
objectives include, but may not be limited to, the following:

1. Equal the return of the Russell 2000 (before fees) over a market cycle;

International Equities

International equity accounts will be evaluated quarterly. Specific objectives
include, but may not be limited to, the following:

1. Exceed the Return of the EAFE Index by 1.0 percent (after fees) over a
market cycle; and

2. Rank in the 40th percentile of a nationally recognized universe
of equity managers possessing a similar style;

Fixed Income

Fixed income accounts will be evaluated quarterly. Specific performance
objectives include, but may not be limited to, the following:

Exceed the Return of the Lehman Aggregate Bond Index by 0.5 percent (after
fees) over a market cycle; and

Rank in the 40th percentile of a nationally recognized universe
of fixed income managers possessing a similar style.

Approved by the Investment Committee on October 5, 1999.

Original Version with Changes

Added language in bold; deleted/relocated language in [brackets]

OREGON STATE BOARD [SYSTEM] OF HIGHER EDUCATION POOLED ENDOWMENT
FUND

Investment Objectives and Policy
Guidelines

I. INTRODUCTION

This statement governs the investment of the Pooled Endowment Fund (the "Fund")
of the Oregon State Board of Higher Education (the "Board") of the
Oregon University System ("OUS").

[This statement documents for investment managers the policy of the Board
with regard to the investment of the Fund's assets, the investment objectives,
and the expectations and requirements with respect to the managers' performance.]

This statement is set forth in order that the Board, the Investment
Committee, its investment advisor and its investment managers and others
entitled to such information may be made aware of the Policy of the Fund
with regard to the investment of its assets. This statement of investment
policy is set forth in order that:

1. There be a clear understanding by the Board, Investment Committee
and staff, of the investment goals and objectives of the portfolio.

2. The Board and management have a basis for evaluation of the investment
managers.

3. The investment managers be given guidance and limitations on investing
the funds.

It is intended that these objectives be sufficiently specific to
be meaningful but flexible enough to be practical. It is expected that the
policy and objectives will be amended from time to time to reflect the changing
needs of the endowment; however, all modifications will be in writing and
approved by the Board.

II. OREGON UNIVERSITY SYSTEM POOLED ENDOWMENT [THE] FUND

The Oregon University System Pooled Endowment Fund (Fund)
is a permanent fund and is expected to operate in perpetuity, so these funds
will be invested long-term. It is important to follow coordinated policies
regarding spending and investments to protect the principal of the funds
and produce reasonable total return.

III. RESPONSIBILITY OF THE BOARD

The responsibility of the Board is to define [(with the concurrence of the
Oregon Investment Council [OIC])] and to recommend to the OIC broad investment
guidelines, selection of investment managers, and determination or approval
of asset allocation. [The investment managers are responsible for optimizing
the return on assets within these guidelines.]

[The Board will assure that a procedurally prudent investment process is
followed. The elements included in, but not limited to, this process are
an asset allocation strategy that addresses risk/reward considerations, a
written statement of investment policy, selection of "prudent experts" or
money managers charged with implementation of investment decisions, control
of the investment expenses, monitoring the performance of investment managers
and other service providers, and identifying and avoiding conflicts of interest.]

IV. INVESTMENT COMMITTEE RESPONSIBILITY

The Investment Committee serves as advisory to the Board and
will have the responsibility and authority to oversee the investments of
the Fund. The Investment Committee will recommend to the Board a specific
asset mix reflecting judgments as to the investment environment as well as
the specific needs of the Fund. Other advisory responsibilities of the Investment
Committee will include:

Recommending professional investment managers.

Negotiating and/or monitoring Fund investment expenses.

Monitoring the investments on an ongoing basis.

Assuring proper custody of the investments.

Reporting to the Board on a quarterly basis the Fund's investment
results, its composition and other information the Board may request.

Recommending to the Board the goal for maintaining purchasing
power.

Recommending distribution per unit to the Board.

To assist in this process, the Board may retain a registered investment
advisor/ consultant. The duties of this investment advisor/consultant are
in Section X.

V. SPENDING POLICY

The amount of endowment return available for spending (distribution) is based
on a percentage of the average unit market value of the 20 quarters preceding
the current fiscal year. The [current year] distribution per unit
(under Exhibit A) is determined by the Board [and is currently
5.5 percent of the five year moving average unit market value]
asrecommended by the Investment Committee.
The distribution amount per unit is multiplied by the current number of units
and any additional units added during the current year as new endowment money
comes into the Fund. This shall be exclusive of investment management fees.

VI. INVESTMENT POLICY GUIDELINES

The Board does not expect the Investment Committee to be reactive
to short-term investment developments, recognizing that the needs for payout
are long-term and that investment competence must be measured over a meaningful
period of time. While the quantitative assessment of managerial competence
will be measured over a complete market cycle, the Board anticipates that
the Investment Committee will make interim qualitative judgments. Specific
qualitative factors which will be reviewed by the Investment Committee on
an ongoing basis include any fundamental changes in the manager's investment
philosophy, any changes in the manager's organizational structure, financial
condition and personnel, and any change, relative to their peers, in the
manager's fee structure.

A. Asset Allocation

The most important component of an investment strategy is the asset
mix, or the resource allocation among the various classes of securities available
to the Fund. The Investment Committee will be responsible for target and
actual asset allocation for the investments that will best meet the needs
of the Fund, taking into consideration the appropriate level of portfolio
volatility.

The risk/return profile shall be maintained by describing a long-term
"target" strategic asset allocation and is set forth in Schedule I of this
Policy.

B. Investment Time Horizon

In making investment strategy decisions for the Fund, the
focus shall be on a long-term investment time horizon that encompasses a
complete business cycle (usually three to five years). Interim evaluation
will be required if a significant change in fees, manager personnel, strategy
or manager ownership occurs.

C. Statement of Derivatives Policy

A derivative is defined as a contract or security whose value is
based on the performance of an underlying financial asset, index, or other
investment. An investment manager shall not use derivatives to increase
portfolio risk above the level that could be achieved in the portfolio using
only traditional investment securities. Moreover, an investment manager will
not use derivatives to acquire exposure to changes in the value of assets
indices that, by themselves, would not be purchased for the portfolio. Under
no circumstances will an investment manager undertake an investment that
is non-covered or leveraged to the extent that it would cause portfolio duration
to exceed limits specified above. The investment manager will report on the
use of derivatives on a quarterly basis to the administrative manager.

VII. PRUDENCE, RESPONSIBILITIES AND CONTROLS

A. Prudence

All participants in the investment process shall act responsibly.
The standard of prudence to be applied by the Board, Investment Committee,
OUS staff responsible for the management of investments, and external service
providers shall be the "prudent investor" rule, which states: "Investments
shall be made with judgment and care, under circumstances then prevailing,
which persons of prudence, discretion and intelligence exercise in the management
of their own affairs, not for speculation, but for investment, considering
the probable safety of their capital as well as the probable income to be
derived."

B. Ethics and Conflicts of Interest

Board members, Investment Committee members, OUS staff
responsible for the management of investments, managers and advisors involved
in the investment process shall refrain from personal business activity that
could conflict with the proper execution and management of the investment
program or that could impair their ability to make impartial decisions. These
parties are required to reveal all relationships that could create or appear
to create a conflict of interest in their unbiased involvement in the investment
process.

[IV. FUND MANAGEMENT

Recognizing that investment competence must be measured over a complete market
cycle, the Board does not expect to react to short-term investment developments.
Nevertheless, the Board may act on interim qualitative judgements. Qualitative
factors that will be reviewed on an ongoing basis include any fundamental
changes in a manager's investment philosophy, any changes in a manager's
organizational structure, financial condition (including any significant
changes in total assets under management), personnel, and any change, relative
to their peers, in the manager's fee structure.]

[V.] VIII. INVESTMENT OBJECTIVES

The investment objective of the Fund is to seek consistency of investment
return with emphasis on capital appreciation over long periods of time, since
the Fund will operate in perpetuity. In keeping with the performance goals
included in the Policy, achievement of this objective shall be done in a
manner that maintains the purchasing power of the principal [amount of these
assets by exceeding the level of inflation by five percent or more as measured
by the Consumer Price Index (CPI)]. The Investment Committee shall
set the goal for maintaining the purchasing power of the principal value
of the assets (under Exhibit A). Under no circumstance shall the principal,
as adjusted for inflation, be diminished.

[Investment portfolio's performance shall exceed the median fund in a universe
of other endowment funds over a complete market cycle. A market cycle is
defined as an investment period lasting three to five years.]

IX. MANAGER(S) RESPONSIBILITIES

A. Legal Compliance - The investment manager(s) is responsible
for strict compliance with the provisions of the prudent investor rule as
it pertains to their duties and responsibilities as fiduciaries.

B. Evaluation Timetable - The manager(s) will be expected
to provide to the OIC, State Treasurer's Office, Board, Investment Committee
and their investment advisor/ consultant on a timely basis each quarter such
data as is required for proper monitoring. In addition, the manager(s) will
provide to the investment advisor/consultant transaction registers and portfolio
valuations, including cost and market data on a monthly basis.

C. Authority of Investment Manager(s) in the Managed Accounts-
Subject to the terms and conditions of this Policy, manager(s) shall have
full discretionary authority to direct investment, exchange and liquidation
of the assets of the managed accounts. The Investment Committee expects that
the investment manager(s) will recommend changes to this Policy when the
manager(s) views any part of this Policy to be at variance with overall market,
economic conditions, and relevant investment policies.

The Investment Committee directs all managers to vote proxies and
to vote them in the best interest of the Fund. The managers will report to
the Investment Committee and their investment advisor/consultant at least
annually as to how proxies were voted.

Each investment manager is required to meet with the Investment
Committee and their investment advisor/ consultant at least annually to
review:

The investment forecast for the following year.

The effect of that outlook on the attainment of the Fund
objectives.

The manager's actual results for the preceding forecast period compared
to the previously established return goal for the reporting period.

The Investment Policy, Guidelines and Objectives of the Fund. If
it is felt by the investment manager that the Policy is too restrictive or
should be amended in any way, written notification must be communicated
immediately.

X. INVESTMENT ADVISOR/CONSULTANT RESPONSIBILITIES

Investment results will be monitored by an independent consulting
organization, under contract by the Board, on a regular basis and reported
to the Investment Committee as soon as practicable after each calendar quarter.
A representative of the investment advisor/consultant shall meet with the
Investment Committee to review for each manager (i) its past performance,
(ii) compliance with the Investment Policy, Guidelines and Objectives of
the Fund, including but not limited to asset allocation, actual return, and
comparative return in relation to applicable index (indices) and to a universe
of comparable funds, (iii) risk profile, (iv) ability of manager to fulfill
the stated objectives of the funds, and (v) any other material matter. A
representative of the investment advisor/consultant shall also report investment
results, or other information, to the Board, OIC and others, as requested
by the Investment Committee. Any noncompliance with the Investment Policy,
Guidelines and Objectives of the Fund or other section of this statement
discovered by the investment advisor/consultant will be reported to the
Investment Committee immediately.

Short-term cash will be invested in the Oregon State Treasurer's
Short-Term Investment Pool.

B. Fixed-income securities, for purposes of these guidelines, shall
mean mortgage-backed securities, U.S. government securities, investment-grade
corporate bonds, and other fixed income securities, such as certificates
of deposit and commercial paper. The objective of this component of the Fund
is to preserve capital in keeping with prudent levels of risk, through a
combination of income and capital appreciation. Realization of income will
be subordinate to safety, liquidity, and marketability (securities should
be readily marketable). This component of the Fund shall adhere to the following
categories:

Fixed-income managers have full discretion over the allocation between long-term,
intermediate, or cash equivalent investments, provided that the duration
of any manager's portfolio shall not exceed the duration of the Lehman Aggregate
Bond Index by more than one and one-half (1-1/2) years.

[The performance of fixed income securities shall exceed the performance
of the Lehman Aggregate Index by 0.50 percent or more after manager fees
on a total return basis and shall also exceed the median in a universe of
other fixed income portfolios over a market cycle.]

C. Equity securities are to be made primarily in well-established,
quality companies. The objective specific to this component of the Fund is
to maximize long-term total return through a combination of income and capital
appreciation. The restrictions pertinent to this portion of the Fund are
as follows:

Large-Cap Equity Requirements:
Not more than ten percent of the companies invested in should have market
capitalizations less than $1 billion (subject to the large-cap equity limitations
of Schedule I). Portfolios should be comprised of at least 30 security issues.

[Performance of equity securities shall exceed the S&P 500 Index by one
percent or more after manager fees and should exceed the median in a universe
of other equity portfolios over a market cycle.]

Small-Cap Equity Requirements:Investments in smaller companies with market capitalization [less than
one billion dollars shall be permitted] similar tothe
Russell 2000 index (subject to the small-cap equity limitations
of [Section VIII.] Schedule I). Portfolios should be comprised
of at least 30 security issues. [If such investments are segregated into
a separate, smaller company portfolio, the performance of the securities
shall exceed the performance of the Russell 2000 Index by one percent or
more after manager fees over a market cycle.]

International Equity Requirements:
Investments in the equity securities of companies located outside the United
States are permitted (subject to the international equity limitations of
[Section VIII.] Schedule I). Portfolios should be comprised
of at least 30 security issues. [Performance of non-U.S. international equity
portfolios shall exceed the performance of the EAFE (Europe, Australia, and
Far East) Index and should exceed the performance of the median in a universe
of other actively managed international equity portfolios over a market
cycle.]

D. Diversification

1. Not more than five percent of the market value of any investment fund
will be invested in any single issue, property, or security. This restriction
does not apply to U. S. Government-issued securities.

2. No investment in any single issue, security, or property shall be greater
than five percent of the total value of the issue, security, or property.

Performance expectations for each of the asset classes is described in Exhibit
A.

XII. OTHER INVESTMENTS

The Board and the Investment Committee recognize[s] that
the addition of other investment classes may reduce total fund volatility.
[It is the intent of] The Board and the Investment Committee
may, with the concurrence of the OIC, place up to ten percent of
the aggregate Fund assets in venture capital, real estate, distressed securities,
and oil and gas partnerships. This allocation is to provide for portfolio
diversification.

[X.] XIII. OTHER GUIDELINES AND REQUIREMENTS

Custodial responsibility for all securities is to be determined by the Board
or its designee(s).

[XI. INVESTOR RESPONSIBILITY

The Board is to meet as often as necessary with the investment managers.
The frequency of meetings is to be determined in part by the performance
evaluation results compared to predetermined objectives and manager
characteristics. The Board is to meet with each manager at least once a year.]

[XII. INVESTMENT MANAGERS

The Board, with the concurrence of the OIC, allocates funds to individual
managers and from time to time may withdraw funds or reallocate funds between
managers. Each manager's performance is to be compared regularly with the
performance of the appropriate market indices and with other universe portfolios
managed with similar assets in a similar manner. As a general guideline that
applies to all assets managed, transactions are to be entered into on the
basis of "best execution," which means best realized price.

Subject to the terms and conditions of this Policy, manager(s) shall have
full discretionary authority to direct investments, exchange, and liquidate
the assets of the Fund. The Board expects that the investment manager(s)
will recommend changes to this policy when the manager(s) view any part of
this Policy to be at variance with overall market and economic conditions.
The Board shall direct all managers to vote proxies in the interest of the
Fund.]

XIV. CONCLUSION

Implementation of this Policy, including investment manager selection, shall
be the responsibility of the [Board] Investment Committee,
subject to the necessary approvals of the Boardand
the OIC.

This Policy shall be reviewed by the Board at least every two years.

SCHEDULE I
[VIII.] ALLOCATION OF ASSETS
The following represents target asset allocations and the ranges by asset
category.

Allocation of asset by class:

Class

[Normal] Target Allocation

Ranges

Equity Category

70%

60%-80%

Fixed Income Category

25%

20%-40%

Cash

5%

0%-10%

Alternative Assets

0%

0%-10%

The allocation of equity assets shall be as follows:

Class

[Normal] Target Allocation(% of Equity)

Ranges

Large-Cap Equity

65%

50%-75%

Small-Cap Equity

20%

10%-30%

International Equity

15%

10%-30%

EXHIBIT A

Performance Monitoring Return Expectations

Spending Policy

The distribution rate for the Fund is 5.0 percent of the five year
moving average unit market value.

Total Fund

The total fund will be evaluated quarterly. Specific performance
objectives include, but may not be limited to, the following:

1. Exceed the level of inflation by 5.0 percent or more as measured
by the Consumer Price Index (CPI) over a market cycle;

2. Exceed the median fund in a universe of other endowments over
a market cycle. A market cycle is defined as an investment period lasting
three to five years.

U.S. Equities - Large Capitalization

Equity accounts will be evaluated quarterly. Specific performance
objectives include, but may not be limited to, the following:

1. Exceed the return of the S&P 500 Index by 0.25 percent (after
fees) over a market cycle; and

2. Rank at or above median of a nationally recognized universe of
equity managers possessing a similar style;

U.S. Equities - Small Capitalization

Small capitalization accounts will be evaluated quarterly. Specific
performance objectives include, but may not be limited to, the
following:

1. Equal the return of the Russell 2000 (before fees) over a market
cycle;

International Equities

International equity accounts will be evaluated quarterly. Specific
performance objectives include, but may not be limited to, the
following:

1. Exceed the Return of the EAFE Index by 1.0 percent (after fees)
over a market cycle; and

2. Rank in the 40th percentile of a nationally recognized
universe of equity managers possessing a similar style;

Fixed Income

Fixed income accounts will be evaluated quarterly. Specific performance
objectives include, but may not be limited to, the following:

1. Exceed the Return of the Lehman Aggregate Bond Index by 0.5 percent
(after fees) over a market cycle; and

2. Rank in the 40th percentile of a nationally recognized
universe of fixed income managers possessing a similar style;

Approved by the Investment Committee on October 5, 1999.

Recommendation to the Board

The Investment Committee recommended that the revised policy be approved
as submitted.

Board Discussion and Action

Mr. Koch questioned the motivation for reinstating the policy. Mr. Willis
responded that the Committee felt the old policy needed revision, and the
role of the Investment Committee required definition.

Mr. Lussier asked to confirm that if the Investment Committee were abolished,
the Board would be able to act on all matters without a major policy revision.
OUS Controller Mike Green indicated that was correct.

President Imeson explained that staff would modify the corresponding Internal
Management Directives (IMDs) and submit recommendations to the Board at a
later date.

On December 9, 1998, the Oregon Court of Appeals ruled, in Tanner v. OHSU,
that the denial of benefits to domestic partners of homosexual employees,
when those same benefits were available to married employees, violated Article
I, Section 20, of the Oregon Constitution. At its April 16, 1999, executive
session, the Board received legal advice and conferred with legal counsel
regarding the effect of Tanner v. OHSU.

The original language of OAR 580-010-0086 allowed that spouses and dependent
children of OUS staff members could enroll as students at OUS institutions
at resident fee rates. Since this rule did not provide the same benefits
to unmarried domestic partners of homosexual employees as was available to
married employees, the rule was deemed inconsistent with the requirements
of the Oregon constitution. At the June 18, 1999, meeting of the Board, OAR
580-010-0086 was revised to include temporary language that would bring the
rule into conformity with Oregon law. Since that time, further rulemaking
procedures were undertaken so that a permanent rule would be in place prior
to the expiration of the temporary rule. A public hearing will be conducted
on October 19, 1999, in order to receive public comment on the proposed rule
change. Additionally, criteria defining "same sex domestic partnership" have
been developed and a process established by which individuals may qualify
for benefits offered under this rule.

The summary of public comment offered on the proposed rule change was made
available at the October 21, 1999, meeting of the Board.

It is more difficult to document the existence of a same sex domestic partnership
than it is to document a marriage. Hence, organizations offering benefits
to domestic partners have relied on the development of criteria that seek
to systematically define what such a relationship is. In the quest to identify
criteria that would define domestic partnerships for OUS' purposes, staff
researched similar criteria published in other states, as well as the criteria
used in defining domestic partnership, for the purposes of receiving health
benefits, per the Oregon Public Employees' Benefits Board. The utilization
of such criteria offers assurances to both the Oregon University System and
its employees that the benefits are offered only to eligible individuals,
and that such benefits are distributed in a fair and equitable manner. Based
on staff research and consultation, the criteria to be utilized by OUS in
defining a same sex domestic partnership, for the purposes of OAR 580-010-0086,
follow.

Individuals claiming a same sex domestic partnership must affirm
that:

(1) Each are of the same sex and are 18 years of age or older; and

(2) They share a close personal relationship and consider themselves responsible
for each other's welfare; and

(3) They are currently each other's sole domestic partner and that neither
has had another domestic partner within the preceding six months; and

(4) Neither one is married to another partner nor are they related by blood
closer than would bar marriage in the State of Oregon; and

(5) They have jointly shared the same regular and permanent residence for
at least six months and have plans to continue this arrangement on an indefinite
basis; and

(6) They are jointly financially responsible for basic living expenses defined
as the cost of food, shelter, and any other costs associated with the maintenance
of a household. (Domestic partners do not necessarily have to share household
expenses equally, as long as they agree that both are jointly responsible.)

The process to be followed to receive benefits under the rule follows.

To claim resident tuition rate benefits under this rule, the OUS staff member
and his/her same sex domestic partner must complete and sign an "affidavit
of domestic partnership" (currently under development, to be available at
campus business, registrar, admission, and/or other offices designated by
the institution) which is based on the criteria stated above, and submit
the affidavit to the designated office of the OUS institution where the domestic
partner is enrolled. Resident tuition rates for same sex domestic partners
under this rule cannot be offered without a completed and signed affidavit.
Supporting documents will not routinely be collected in support of the affidavit.
Should questions or challenges to the existence of a valid domestic partnership
arise, however, documentary proof to support the claim to domestic partnership
would be required. Examples of acceptable documentary evidence include, but
are not limited to, the following:

Joint mortgage, lease, utility bills, phone listing, or other documents that
would conclusively establish residency at the same address;

Designation of the domestic partner as primary beneficiary for a life insurance
policy or a retirement contract;

Designation of the domestic partner as the primary beneficiary in the OUS
staff member's will;

Durable power of attorney for health care or financial management;

Joint ownership of a motor vehicle, a joint checking account, or a joint
credit account;

A relationship or cohabitation contract which obligates each of the partners
to provide support for the other.

580-010-0086(1) The spouse and dependent children of regular Department staff
members with a full-time equivalent of at least .50 may enroll as students
at resident fee rates in Department institutions. Effective January
1, 1999, for purposes of this rule, "spouse" includes the same sex domestic
partner of an employee. The Chancellor or designee shall establish criteria
to determine domestic partner eligibility.
(2) The spouse and dependent children of Department visiting instructors
from other countries or other states with a full-time equivalent of at least
.50 may enroll in Department institutions at resident fee rates during the
terms that the parent, guardian, or spouse is serving a Department institution
as a visiting instructor.

Board Discussion and Action

OUS Director of Legal Services Ben Rawlins reviewed the reasoning for the
amendment to the rule and the criteria developed to address same sex domestic
partner cases.

Mr. Koch asked if staff had looked into the criteria recently approved by
the Ashland City Council recognizing domestic partnership. Mr. Rawlins responded
that research included a review of that particular case, as well as seeking
reactions from affected groups. He added that at the October 19 public hearing
on the rule amendment, two persons appeared and endorsed the new language.

Asking if any lawsuits or challenges to the policy had been raised by
heterosexual domestic partners, Mr. Koch said that should probably be something
the Board remains mindful of. Mr. Rawlins explained that the dictates of
Tanner v. OHSU pertain only to same sex partners, but that future discussions
will likely occur. Continuing, Mr. Rawlins said, "Staff have been looking
into the issue. Given the economic impact, administrative plans would need
to be made in an orderly manner if the Board determined it wanted to pursue
extending those benefits."

President Imeson reminded Board members that they were not making policy
by amending the rule, but rather following a policy decision made by the
Oregon Supreme Court. He reiterated that the criteria established would make
it difficult for people to take advantage of the benefits.

Mr. Willis moved and Mr. Koch seconded the motion to approve the rule amendment
as submitted. On roll call vote, the following voted in favor: Directors
Aschkenasy, Hempel, Koch, Lehmann, Lussier, Richmond, Willis, Wustenberg,
and Imeson. Those voting no: none.

Portland State University requested authorization to award an honorary doctorate
to General Colin L. Powell when he visits PSU in November 1999.*

General Powell was born to immigrant Jamaican parents in Harlem. He was educated
in the New York City public school system and graduated from the City College
of New York with a bachelor's degree in geology. He also participated in
ROTC and received a commission as an Army second lieutenant upon graduation
from college. His further academic achievements include an MBA degree from
George Washington University.

General Powell was a professional soldier for 35 years, during which time
he held myriad command and staff positions. His latest assignment was as
the 12th Chairman of the Joint Chiefs of Staff, the highest military
position in the Department of Defense. During that time, he oversaw 28 crises
including Operation Desert Storm in the victorious 1991 Persian Gulf War.
General Powell currently serves as chairman of America's Promise--The Alliance
for Youth, a national crusade to improve the lives of our country's young
people. Established at the President's Summit for America's Future in April
1997, America's Promise aims to ensure that all children in the United States
have access to the fundamental resources needed to build and strengthen them
to become responsible, productive citizens. General Powell is a member of
the board of trustees of Howard University and a member of the board of directors
of the United Negro College Fund. General Powell also serves on the board
of governors of the Boys and Girls Clubs of America and is a member of the
advisory board of the Children's Health Fund.

Besides numerous U.S. military awards and decorations, General Powell has
received many civilian awards, including two Presidential Awards of Freedom,
the Congressional Gold Medal, and others. In addition, he is the recipient
of an honorary knighthood bestowed by H.M. Queen Elizabeth II of Great Britain.

Staff Recommendation to the Board

Staff recommended Board authorization to Portland State University to award
an honorary doctorate to General Colin L. Powell at a special event in November
1999.

Board Discussion and Action

Dr. Aschkenasy moved and Ms. Wustenberg seconded the motion to grant the
honorary doctorate as submitted. The following voted in favor: Directors
Aschkenasy, Hempel, Koch, Lehmann, Lussier, Richmond, Willis, Wustenberg,
and Imeson. Those voting no: none.

* The Board of Higher Education permits institutions, with the concurrence
of their faculties, to award honorary degrees. Each institution wishing to
award honorary degrees must adopt criteria and procedures for selection that
will ensure the award honors distinguished achievement and outstanding
contributions to the institution, state, or society. Criteria and procedures
for selection must be forwarded to the Chancellor or designee for approval
and, when approved, filed with the Secretary of the Board. Institutions are
required to forward their recommendations for honorary degrees for the Board's
approval 90 days before the award date.

In accordance with Board regulations, the following members represented the
Board in approving candidates for degrees and diplomas for the graduating
classes at the designated institutions during the 1998-99 academic year and
summer session:

Eastern Oregon University
Diane Christopher

Oregon Health Sciences University
Tom Imeson

Oregon Institute of Technology
Jim Lussier

Oregon State University
Phyllis Wustenberg

Portland State University
Don VanLuvanee

Southern Oregon University
Gail McAllister

University of Oregon
Katie Van Patten
Jim Willis

University of Oregon Law School
David Koch

Western Oregon University
Phyllis Wustenberg

Staff Recommendation to the Board

Staff recommended that the Board confirm the actions of Board members in
approving degrees and diplomas.

Board Discussion and Action

Mr. Lussier moved and Mr. Willis seconded the motion to approve the degree
confirmations as submitted. The following voted in favor: Directors Aschkenasy,
Hempel, Koch, Lehmann, Lussier, Richmond, Willis, Wustenberg, and Imeson.
Those voting no: none.

In 1997, Oregon legislation (SB 487) increased educational requirements for
certified public accountants (CPAs) from 180 quarter hours to 225 quarter
hours. This change, which will go into effect January 2000, is aligned with
statutory changes in 40 other states and will make it easier for Oregon CPAs
to practice in other jurisdictions.

The increased educational requirement essentially constitutes a fifth year
of preparation, which may be performed at the postbaccalaureate or master's
level. When this statutory change was being considered by the legislature,
OUS faculty in business and accounting carefully studied how best to respond.
Three OUS institutions (OSU, PSU, and UO) have developed programs responsive
to the legislation. The University of Oregon's re-established Master of
Accounting has been approved by the Board and will be implemented in fall
1999. Portland State University's M.S. in Financial Analysis is undergoing
an external review, after which it will be presented to the Board for final
approval. OSU's proposed program, which will be implemented in fall 2000,
is described below. Although all three programs have been developed concurrently,
each has a slightly different emphasis, providing a broader set of choices
for Oregon students.

Staff Report to the Board

Oregon State University requested Board authorization to establish the Master
of Business Information Systems (MBIS), with an option in financial systems
and analysis. This program targets students with undergraduate degrees in
business, specifically those with options in accounting and finance. The
program recognizes that, in addition to accounting skills, accountants must
understand information systems and possess the ability to perform more complex
analyses. This fifth-year graduate degree meets the learning objectives outlined
by the Oregon Society of CPAs, as well as fulfilling the educational requirements
to be a licensed CPA.

The MBIS has two objectives, the first of which is to provide an advanced
education that prepares undergraduate degree holders for careers in accounting,
finance, and information systems management. The second objective is to provide
an advanced education that enhances the abilities of people already employed
in those professions.

Competencies expected, and coursework leading to those competencies, are
highly structured and cover such areas as cost management; auditing; budgeting,
forecasting, and business planning; taxation, including corporate taxation;
valuation methods; risk management; mergers and acquisitions; financial and
accounting information systems; data telecommunications and networks; and
human and ethical issues. The curriculum has been designed with close assistance
from the Management Information Systems Advisory Council and the Accounting
Advisory Council in OSU's College of Business. The members of both councils
represent industries that hire such graduates.

The program will require the development of 12 new graduate courses. With
the addition of three new faculty members and 1.0 FTE support staff, resources
will be sufficient to offer this program. Funding will come from monies accruing
to the University from students enrolled in the MBIS program.

The enrollment target is 45 new students annually. The program is designed
to primarily meet the needs of business baccalaureate graduates, particularly
those with accounting, finance, or information systems emphases. The MBIS
will secondarily be available to non-business majors, depending on the
applicant's qualifications and the program's space availability. Because
the program is designed to satisfy the educational requirements of accounting
majors, accounting-degree holders will have priority for 20 of the 45 positions
in the MBIS program.

Employment prospects are bright for graduates of this program. Increasingly,
accounting and finance professionals are expected to possess the skills and
abilities to serve as business advisors and business partners, providing
a high level of business analysis and decision support. The proposed program
will provide just such preparation.

All appropriate University committees and the Academic Council have positively
reviewed the proposed program. The external review team stated that it "is
impressed with the program concept, curriculum design, and opportunities
for success." The team concurred with OSU's assessment of the direction in
which accounting and information technology has been evolving, and the team
also concurred that there are strong employment prospects for graduates of
this program.

Staff Recommendation to the Board

Staff recommended that the Board authorize Oregon State University to establish
a program leading to the Master in Business Information Systems. The program
would be effective fall 2000, and the OUS Office of Academic Affairs would
conduct a follow-up review in the 2005-06 academic year.

Board Discussion and Action

Mr. Lussier moved and Mr. Willis seconded the motion authorize the program
proposal as submitted. The following voted in favor: Directors Aschkenasy,
Hempel, Koch, Lehmann, Lussier, Richmond, Willis, Wustenberg, and Imeson.
Those voting no: none.

The University of Oregon proposed to offer the M.S. degree in Applied Physics,
effective fall term 1999. It is designed to serve physics students whose
primary interest is applied research and development, rather than basic research.
Students with the latter interest may continue to choose the M.S. in Physics
for which UO has authorization. This Applied Physics degree will serve as
a professional credential that will help graduates obtain jobs in the
high-technology industry. In consultation with industry representatives,
UO will establish areas of concentration (e.g., optics/electronics or
computational focus) so that graduates will have an area of specialized
knowledge, thus enhancing their attraction to potential industry employers.

This program requires successful completion of 45 graduate credits. A research
practicum or thesis will be required in the student's chosen area of
specialization. The practicum may be fulfilled by one of three means: (1)
participation in an industrial internship program, (2) development of a new
project in the teaching lab, or (3) a research thesis in the UO lab. In the
internship or teaching lab option, students will be required to write a
high-quality technical report for, and verbally present it to, an applied
physics oversight committee. The thesis option will be conventional. In addition
to the 9 credits of research practicum, degree requirements include 12 core
credits in device physics, 8 core credits in design of experiments, and 16
credits of approved relevant electives. The new courses in this proposal
are, in reality, applied revisions of existing courses.

It is anticipated that this program will attract 12 to 15 students per year.
Employment prospects for graduates of traditional physics programs have changed
during the past decade. State and federal budgetary restrictions, coupled
with increased international economic competition, have resulted in fewer
research and academic job opportunities. To be viable in the current and
projected job market, scientists must have broader training; consequently,
communication skills will be emphasized in this program. The required writing
portion of the practicum is a technical exposition describing the practicum
components, and the expected standard will be the same as that required for
publication in a technical journal.

This program is a response to recent widespread criticism leveled at Ph.D.
programs, asserting that such programs train students too narrowly and
inadequately for careers in the private sector. Students graduating from
this program will be prepared in technology-based fields for which existing
doctoral degrees do not provide sufficient training. This program, and the
OSU program in Applied Physics authorized by the Board in February 1999,
is directly responsive to the Associated Oregon Industries' request that
OUS produce greater numbers of graduates for this state's high-technology
industry.

With faculty in optical science, materials science, solid-state physics,
biophysics, high-energy physics, and astrophysics, UO has the versatility
and expertise to provide guidance in areas of industry needs. UO also has
instructional laboratories and a wide array of state-of-the-art instrumentation
to support this program. Additional faculty, facility, and equipment resource
needs will be met through internal reallocation in the Physics Department.

All appropriate University committees and the Academic Council have positively
reviewed the proposed program. The requirement for an external review was
waived because the proposed Applied Physics major does not represent a
significant new graduate major.

Staff Recommendation to the Board

Staff recommended that the Board authorize the University of Oregon to establish
a program leading to the M.S. degree in Applied Physics. The program would
be effective fall term 1999, and the OUS Office of Academic Affairs would
conduct a follow-up review in the 2005-06 academic year.

Board Discussion and Action

Dr. Aschkenasy asked for clarification on the statement made referring to
widespread criticism being leveled on limited Ph.D. programs. "Does it mean
that you're going to train fewer Ph.Ds in Physics in the future?" he continued.

UO Provost Moseley responded that it really depended on student demand. "The
purpose of this new applied degree is to provide a vehicle for students who
are not interested in the more academic Ph.D., but are more inclined to a
securing strong applied physics background that is appropriate for industry,"
Dr. Moseley explained. "We see this as a good opportunity for a significant
number of students," he concluded.

Mr. Lussier moved and Mr. Willis seconded the motion authorize the program
proposal as submitted. The following voted in favor: Directors Aschkenasy,
Hempel, Koch, Lehmann, Lussier, Richmond, Willis, Wustenberg, and Imeson.
Those voting no: none.

Recently, the Chancellor's Office was notified by the U.S. Department of
Education of the award of two three-year grants: one totaling $4.8 million,
the other, $1.4 million. Both grants will further the work of the Oregon
University System and its partnerships with other institutions, educational
sectors, government agencies, and private enterprise. The larger grant, which
Oregon submitted to the Title II Teacher Quality Enhancement Program, is
a state grant involving the Governor's Office, the Teacher Standards and
Practices Commission (TSPC), the Oregon University System, and numerous other
educational partners. The other grant was submitted to the Learning Anywhere
Anytime Program (LAAP), whose objective is to provide innovation to distance
education and broaden student access to education. Dr. Holly Zanville, Associate
Vice Chancellor for Academic Affairs, serves as principal investigator on
both grants. Each grant is described in more detail below.

Title II Grant: Oregon Quality Assurance in Teaching Program (O-QAT)

Oregon was one of 24 states (out of 41 that applied) to receive funding for
this Title II grant. In spring 1999, a statewide planning committee for O-QAT
developed eight goals related to improving teacher licensure preparation
and workforce in Oregon. These goals were developed out of the need to align
teacher licensure requirements with Oregon's K-12 standards-based school
reform plan and to ensure high-quality teacher preparation. The five project
objectives are:

to assist institutions with developing and implementing components of the
redesigned continuing license and professional development programs;

to expand the state's capacity to address critical teacher shortage areas,
particularly through new recruitment strategies and nontraditional teacher
preparation programs; and

to improve state-level planning and policy development relating to teacher
quality.

O-QAT will strive to achieve six key outcomes:

1. Oregon's capacity to hold 16 institutions (6 public and 10 independent)
accountable for high-quality teacher preparation will be enhanced by completion
of Institutional Report Cards on new teacher candidates, and a State Report
Card, as required by federal legislation.

2. Six thousand teacher candidates completing approved preparation programs
leading to the initial licence between 1999 and 2002 (and beyond) will be
well-prepared to assume responsibilities as beginning teachers in standards-based
classrooms.

3. Performance-based measures for the new continuing license will be developed
and pilot tested with several hundred teachers, and will be implemented
collaboratively by O-QAT partners.

4. Several model continuing license programs will be implemented by higher
education institutions throughout Oregon and widely available to current
teachers.

5. Oregon's capacity to address critical teacher shortage areas by 2002 (and
in the future) will be enhanced by serving more diverse target populations
via new alternative pathway programs.

6. Interagency studies and policy development in teacher quality will be
enhanced, leading to more effective statewide planning after the grant.

O-QAT will be advised by an interagency team reporting to the Joint Boards
of Education and TSPC. Members will include representatives from the Governor's
Office, TSPC, Oregon Department of Education, Office of Community College
Services, Oregon Education Association, Proficiency-based Admission Standards
System project, and the Teaching Research Division at Western Oregon University.
The deans and directors of Oregon's Schools and Colleges of Education, both
public and independent, will play a major role in implementing O-QAT initiatives
and monitoring progress in meeting O-QAT goals and objectives.

The LAAP grant generated large-scale interest nationwide. More than 650
preliminary proposals were submitted; 122 were invited to the final round.
OUS is one of only 29 selected for an award.

For nearly a decade, OUS has delivered degree programs via ED-NET. With the
state's distance education network changing and student demand increasing
for asynchronous education delivery, OUS must transition from first- to
second-generation distance education practices, providing "anywhere/anytime"
access to courses, programs, and services. This three-year grant will help
make that goal a reality.

There are four major project activities:

A statewide committee will develop OUS guidelines for second-generation distance
education, covering academic, technical, and service standards, as well as
identifying responsibilities of the System, institutions, and programs. All
eight Oregon public universities will participate in this committee.

About 100 courses, core to 14 distance education programs in six fields (nursing,
agriculture, arts and sciences, business/information management, human services,
and teacher education), will be redesigned for second-generation distance
education modes. Each program will use the OUS guidelines and a variety of
outsourcing services (e.g., eCollege.com, Blackboard).

An in-depth, external evaluation will be conducted by the National Center
for Higher Education Management Service (NCHEMS). A key component of the
evaluation will be assessment of the feasibility and cost-effectiveness of
universities partnering with commercial providers to design and deliver
second-generation distance education.

Board Discussion

Following a review of the grant awards by Vice Chancellor Clark, Dr. Richmond
inquired about monies moving to campuses versus being used for administration
and planning. Dr. Clark responded that most funds would move to campuses,
in the form of support for faculty, who, on an overload basis, will be given
work in redeveloping courses and establishing standards for distance education.

The President of Oregon Institute of Technology reported her decision to
rename one of OIT's academic classroom buildings, South Hall, after the late
State Senator Harry Boivin, in recognition of the important role he played
in OIT's history. OIT plans a dedication ceremony for the spring of 2000.

Staff Report to the Board

OAR 580-050-0025 sets forth the policies concerning naming of campus facilities.
No building may be named for a living person unless the Board makes an exception
in accordance with the provisions of the OAR. In all other circumstances,
a campus president is authorized to name buildings and structures.

In concert with this OAR, President Martha Anne Dow announced her decision
to rename South Hall, an academic classroom building at OIT, for the late
State Senator Harry Boivin who passed away March 15, 1999, at age 95.

Senator Boivin was trained as an attorney in Oregon. In 1935, he was elected
State Representative from Klamath Falls, and subsequently became the youngest
Speaker of the House in Oregon history. During World War II, he left the
legislature, returning in the 1950s as a member of the Senate. Elected President
of the Senate, he was instrumental in securing legislative support and funding
to locate the OIT campus in Klamath Falls.

In recognition of Senator Boivin's many contributions, the State Board of
Higher Education conferred an honorary doctorate degree to him in June 1992.
He received OIT's Greatest Service Award twice, in 1960 and again in 1995.
To honor his memory, OIT will hold a renaming dedication ceremony in spring
of 2000.

Board Discussion

OIT President Dow shared her memories of Mr. Boivin since assuming the presidency
in May 1998. "I spent at least four hours a week in dialogue with him. This
was an incredible experience for me," said Dr. Dow.

On a related subject, Chancellor Cox shared that on October 24, a dedication
and building naming at OSU was planned for the late John Owen, former dean
of Engineering at OSU and vice chancellor of the Oregon Center for Advanced
Technology Education (OCATE).

A comprehensive report on the Oregon University System's entire investment
portfolio, consisting of endowment funds (both pooled and separately invested),
donation funds, and plant funds, was incorporated in the System's Investment
Report, which was included with the supplemental materials (on file in the
Board's office).

The annual report on the System's pooled endowment funds is presented in
two parts: (1) a brief narrative that delineates the annual performance results
of our investments, and (2) a table comparing investment performances for
fiscal year ending June 30, 1999, to prior periods and to related benchmarks.

The June 30, 1999, market value and asset allocation of the System's pooled
endowment fund investments are summarized as follows:

Pooled Endowment Fund Investments

Fund Title

Market Value
06/30/99

% of
Total

Barclays Global Investors Alpha Tilts Fund B

$28,797,319

46.3%

Barclays Global Investors Russell 2000 Index Fund B

8,600,929

13.8%

T. Rowe Price Foreign Equity

6,276,962

10.1%

The Commonfund Multi-Strategy Bond Fund

12,790,469

20.5%

The Commonfund Real Estate Investment Trust

1,482,050

2.4%

The Commonfund Endowment Energy Partners

33,410

0.1%

The Commonfund Endowment Partners Fund

204,537

0.3%

The Commonfund Endowment Venture Partners

391,556

0.6%

TOTAL Investments

$58,577,232

94.1%

Cash Invested in State Treasury's Short Term Investment Pool

$ 3,682,080

5.9%

TOTAL Pooled Endowment Funds

$62,259,312

100.0%

Summary

Equity:

Commonfund Multi-Strategy Equity Fund, sold on December 31, 1998 at a
fair value of $38,264,388. The CF Multi-Strategy Equity Fund returned
1.9 percent for the period of July through December, 1998, compared with
9.3 percent for the S&P 500 Index. Large U.S. companies with strong earnings
comprised the most secure asset class during this period, and drove the
performance of the S&P 500. The Multi-Strategy Equity Fund is highly
diversified over all asset classes. Its diversification into small cap and
international investments caused the fund to severely lag the S&P 500.

Following approval by the Board and the Oregon Investment Council (OIC),
the Commonfund Multi-Strategy Equity Fund was sold on December 31, 1998,
and the proceeds were invested with new managers during January and February
1999. The proceeds were allocated as follows: 65 percent to Barclays Global
Investors, Alpha Tilts Fund; 20 percent to Barclays Global Investors, Russell
2000 Index Fund; and 15 percent to the T. Rowe Price International Mutual
Fund.

The Alpha Tilts portfolio returned 11.9 percent for the period of January
through June 1999, while the S&P 500 Index returned 12.3 percent for
the same period. The Alpha Tilts Fund utilizes tight risk controls that will
primarily produce returns in line with the S&P 500. The Fund just slightly
underperformed for the six-month period.

The Russell 2000 Index Fund B had a return of 8.6 percent for the six months
ending June 30, 1999. This was below the Russell 2000 index return of 9.3
percent for the same period. An index fund should perform in line with the
benchmark that it tries to replicate; however, investment management fees
will drive the performance slightly lower. While fees account for a small
portion of BGI's under performance, it is primarily due to the timing of
our purchase in January and the manager's inability to exactly track the
index. Manager's can have difficulties exactly replicating the performance
of such a large index as the Russell 2000.

The Foreign Equity Fund returned 5.5 percent and outperformed the MSCI EAFE
Index return of 4.1 percent for the six-month period ending June 30, 1999.
T. Rowe Price outperformed the EAFE Index during the six-month period due
primarily to stock selection. They also have added value through a 5.0 percent
allocation to Latin American countries. The economies of these underdeveloped
countries rebounded dramatically in the first half of 1999.

Fixed Income:

Commonfund Multi-Strategy Bond Fund (6/30/99 market value $12.8 million,
20.5 percent of total). The Multi-Strategy Bond Fund is a "Fund of Funds,"
which means that it is a fund made up of allocations to other fixed income
funds of the Commonfund. These funds include the High Quality Bond Fund,
The Global Bond Fund and the International Bond Fund.

For the fiscal year, the fund gained 2.2 percent, while the Lehman Aggregate
Index advanced 3.1 percent. The Multi-Strategy Bond Fund invests 27 percent
of the portfolio in corporate bonds compared to the Lehman Aggregate allocation
of just 15 percent. Corporate bond performance has slightly trailed the
performance of treasuries, agencies and mortgage backed securities in the
last year. Thus, the over weight of corporate bonds has not added value to
the fund. Furthermore, the fund has a slightly more aggressive duration than
the Lehman Aggregate, which has hurt the fund in the rising interest rate
environment.

Other Investments:

Commonfund Capital Real Estate Investment Trust (6/30/99 market value
$1.5 million, 2.4 percent of total). Through March 31, 1999, Real Estate
Investment Trust's total return since inception stood at 6.81 percent, slightly
ahead of the 5.75 percent total return for the benchmark, National Council
of Real Estate Investment Fiduciaries Index, over the same period.

The fund returned 12.63 percent for the fiscal year compared to the benchmark
return of 14.38 percent. The total liquidation of the fund is scheduled for
December 31, 2000.

Commonfund Capital Endowment Energy Partners (6/30/99 market value $33,410,
0.1 percent of total). Endowment Energy Partners I (EEP I) has produced
a net internal rate of return of 9.0 percent since its inception in October
1989 through June 30, 1999. EEP I completed its five year investment phase
on December 31, 1994, and is scheduled for liquidation by December 31, 1999.

Commonfund Endowment Partners Fund I (6/30/99 market value $204,537, 0.3
percent of total). Endowment Partners I (EDF I) has an internal rate
of return of 13.4 percent since its inception in October 1998 through March
1999. This fund was scheduled for liquidation by December 31, 1998, but has
been extended to December 31, 1999.

Commonfund Endowment Venture Partners I (6/30/99 market value $391,556,
0.6 percent of total). The net internal rate of return on capital received
from Endowment Venture Partners I (EVP I) participants since inception in
1990 through March 31, 1999, stood at 26.0 percent. This fund is scheduled
for liquidation by June 30, 2002.

The following table summarizes the investment performance results for the
fiscal year ending June 30, 1999, for the OUS Pooled Endowment Fund:

OREGON UNIVERSITY SYSTEM
POOLED ENDOWMENT FUNDS
PERFORMANCE COMPARISON(Based on Total Return)

Annual Performance

94-95

95-96

96-97

97-98

98-99

Total Endowment

OUS Total Endowment

15.8%

16.4%

18.9%

21.6%

10.0%

NACUBO, Pools $25m to $100m

15.8%

16.7%

20.1%

17.7%

--

Equity:

CF Multi Strategy Equity Fund (1)

17.6%

23.5%

25.4%

25.0%

1.9%

Benchmark-S&P 500 Stock Index (1)

26.0%

26.1%

34.7%

30.2%

9.3%

BGI Alpha Tilts Fund B (2)

--

--

--

--

11.9%

Benchmark-S&P 500 Stock Index (2)

26.0%

26.1%

34.7%

30.2%

12.3%

BGI Russell 2000 Index Fund B (2)

--

--

--

--

8.6%

Benchmark-Russell 2000 Index (2)

--

--

--

--

9.3%

T. Rowe Price Foreign Equity (2)

--

--

--

--

5.5%

Benchmark-MSCI EAFE Index (2)

--

--

--

--

4.1%

Fixed (Bond) Investments

OUS Multi-Strategy Bond Fund

13.7%

6.3%

10.0%

11.3%

2.2%

Lehman Aggregate Bond Index

12.5%

5.0%

8.2%

10.5%

3.1%

Other Investments

Real Estate Investment Trust

8.5%

8.8%

8.5%

13.1%

10.7%

Endowment Energy Partners

33.0%

1.5%

0.5%

-39.5%

-40.9%

Endowment Partners Fund

9.2%

4.9%

11.3%

19.4%

14.9%

Endowment Venture Partners

40.4%

53.2%

12.6%

23.9%

75.1%

(1) CF Multi-Strategy Equity Fund was sold on December 31, 1998. Returns
for the fund and its benchmark are for six months only, July-December
1998.

Controller Mike Green summarized the investment report. He pointed out that
return information on pooled endowment funds was different, due to a divestiture
from the Commonfund Equity investment to the BGI Alpha Tilts Fund. Those
monies had a market value of $49 million, or about 46 percent of the total
fund, explained Mr. Green.

Referring to a change in the alternative investments (oil and gas, real estate,
and venture capital totaling no more than ten percent of the Fund), Mr. Green
said that, with the help of investment advisors, the Committee determined
that funds would not be reinvested as they did not provide much benefit.
Significant administrative costs was another reason behind the decision.

The Internal Audit Division's (IAD) Semi-Annual Audit Report January-June
1999, included in the supplemental materials (on file in the Board's
office), summarized audit results from projects completed over the past six
months and provided an update on the status of IAD's 1998-99 Audit
Plan. As part of the risk assessment program identified in the 1998-99
Audit Plan, departmental audits were completed at three OUS institutions.
These audits focused on the business and administrative functions normally
performed by campus departments. IAD also completed audits of the human resource
function at five institutions, concentrating on operations impacted by Senate
Bill 271. IAD dedicated significant consulting resources to provide support
and information to the Board in three critical areas: (1) the remodel of
the OUS budget system for allocating education and general funds to the
institutions, (2) the policy related materials that govern OUS's fiscal
operations, and (3) the conversion status of OUS's new Human Resources
Information System.

Board Discussion

OUS Internal Audit Division Director Marv Wigle reviewed the information
provided to Board members. Updating the Board on the OUS audits, which total
more than 700 departments, Mr. Wigle reported that nearly one-third had been
completed. Human resources audits, conducted at each institution, have been
virtually completed.

The Internal Audit Division (IAD) presented its audit plan for the 1999-00
fiscal year, which was included in the supplemental materials (on file in
the Board's office). This plan incorporates selected best audit practices
endorsed by the Institute of Internal Auditors, the American Institute of
Certified Public Accountants, and other professional audit organizations.
These practices have been integrated by IAD into three core programs designed
to help address OUS's audit-related needs for the upcoming year: (1) the
1999-00 Risk Assessment Audit Program, which includes departmental audits,
as well as reviews related to human resources, the OUS Resource Allocation
Model, OUS performance indicators, Hyperian software, and Banner
HRIS payroll; (2) the Consulting Services Program, which includes provisions
for consulting on both campus and Systemwide issues; and (3) the Control
Assessment and Training Program, which makes available combined risk assessment
and internal control training sessions to campus departments. In addition
to these programs, the plan provides for such other projects and services
as campus request audits, audit follow-ups, outsourcing, fraud audits, and
liaison for Federal, Oregon Audits Division, and other external audits and
reviews.

Board Discussion

Mr. Wigle pointed out three specific priority items: (1) continuation of
the 12-month audits, considered to be the backbone of IAD's field work; (2)
identification of areas in the Resource Allocation Model and performance
indicators that will lend themselves to audit, in an attempt to validate
the integrity of those processes and programs; and (3) payroll audits at
each institution.

Ms. Wustenberg remarked that as more responsibility is turned over to campuses,
the role of IAD is vital in ensuring appropriate business practices.

Mr. Wigle agreed, explaining that in a recent risk assessment, it was clear
that resources needed to be allocated to that end. Furthermore, he said that
IAD is beginning to assist with the establishment of interim audit programs
at the institutions. "We think that is going to significantly extend the
audit coverage that we get in the System. It also has a tendency to engender
an increase in attention to control issues in the departments."

Mr. Koch asked if the recommendations submitted by IAD were ever questioned
or challenged by departments. Mr. Wigle said that, for the most part, compliance
is very good. He added that in his experience, the recommendations were taken
seriously and staff respond positively.

Pointing out that much of IAD's staff time over the past 18 months was redirected
to work on the new Resource Allocation Model, Vice Chancellor Anslow commended
IAD staff for their work, saying that it was the highest and best use of
the division at that moment and time.

The Oregon University System recently received a grant from the U.S. Department
of Commerce Experimental Program (EPSCoT). EPSCoT is a matching grants program
that supports technology development, deployment and diffusion in eligible
states by promoting partnerships between state and local governments,
universities, community colleges, non-profit organizations and the private
sector.

OUS serves as the lead applicant for this grant that seeks to re-orient Oregon's
economic development strategy and reduce barriers between higher education
and emerging technology businesses. It is focused on three areas: research
and development, knowledge transfer, and industry cluster identification
and assistance. Under the direction of the Governor, the state has moved
away from a strategy of industrial recruitment and is instead focusing its
efforts on growing Oregon-based companies. The proposed activities flow naturally
out of a planning and coalition-building process and thus enjoy the strong
support of the Governor, business community and higher education system.
Partner organizations include the Oregon Economic Development Commission,
the Board of Higher Education, the Board representatives from Oregon Independent
Colleges Association, and community colleges.

The grant-related activities will improve the climate for entrepreneurs and
provide a model for other states seeking to re-orient their economic development
strategies. The $250,000 grant will be matched by $350,000 in state funds
($175,000 in-kind) for a total grant of $600,000. The grant supports the
activities of the Economic Development Joint Boards Working Group.

Economic Development Joint Boards Working Group

The Economic Development Joint Boards Working Group (EDJBWG) was appointed
by Governor Kitzhaber on May 6, 1999. EDJBWG is the governing body for the
EPSCoT grant. The major areas of focus for both the working group and the
grant include research and development, knowledge transfer and industry cluster
identification and assistance.

Membership on EDJBWG includes representatives from the following organizations:

Central Oregon Regional Advisory Board
Mr. Lussier reported that the group continues to meet at least monthly. Current
work includes consolidation of the vision for Central Oregon, reviewing
governments and potential structures, and ways and means assessment.

Noting that it had been nearly one year since CORAB was formed, Mr. Lussier
asked that the Advisory Board present a more comprehensive report at the
December Board meeting.

Investment
Ms. Wustenberg deferred to Mr. Green for further comment. He indicated that
the Committee convened on September 16 and October 5 to review policy guidelines
as approved by the Board earlier in the meeting.

Joint Boards Working Group
Mr. Lussier said that at a meeting on September 17, Working Group members
received many reports, including an analysis of legislative actions affecting
both Boards.

Nominating
Dr. Aschkenasy announced that the Committee nominated Mr. Imeson to serve
as president in 1999-00. However, a candidate for vice president was still
subject to future discussion. Executive Committee members nominated included
Dr. Aschkenasy, Mr. VanLuvanee, Mr. Willis, Ms. Wustenberg, and Mr. Imeson.
Due to the postponement in naming a vice president, Dr. Aschkenasy said that
final action on the full slate of officers would be deferred to a later date.

OHSU
Dr. Hallick for a reported that at a recent Board retreat, intense dialogue
ensued on everything from mission and vision, core values, business plans,
and research program development.

System Strategic Planning
According to Mr. Willis, recent activities included review of a conflict
of interest statement, discussion on the specific role of Board members,
and creation of Board member position descriptions. Dr. Vines added that
the Committee had also worked on plans for the renewal.

Mr. Willis expressed his appreciation to OSU staff for their hospitality
at a recent football game, where he hosted two youngsters from the Salem
Boys and Girls Club. Ms. Wustenberg echoed Mr. Willis' comments, as she had
recently attended a game at the invitation of President and Mrs. Risser.
She welcomed new Board members to their first official meeting.

Dr. Aschkenasy commended President Dow for OIT's renewed vigor in the System.
He thanked her for her hospitality during the Board's visit to the Metro
Center.

Citing her recent visits to several institutions, including OIT, PSU, SOU,
and UO, Dr. Richmond expressed her gratitude to all of the presidents for
their time. "I have a much better appreciation for the campuses because of
the visits," she said.

Mr. Hempel shared that he was extremely happy to be a part of the Board,
adding that, "It's going to be a terrific learning experience for me and
I hope that I can provide some benefit to the System."

Reporting that he had recently attended a regional planning conference, Mr.
Lussier said that the keynote speaker urged participants to look at regions
and not operate in silos or political entities as now so many things in the
new global economy cross traditional lines. "Certainly, this is a lesson
for us in higher education as well," he observed.

President Imeson read the statement pertaining to delegation
of authority to the Board's Executive Committee:

"Pursuant to Article II, Section 5 of the Bylaws of the Board of Higher
Education, the Board delegates to the Executive Committee authority to take
final action as here designated or deemed by the Committee to be necessary,
subsequent to the adjournment of this meeting and prior to the Board's next
meeting, which is scheduled for December 17, 1999. The Executive Committee
shall act for the Board in minor matters, and any matter where a timely response
is required prior to the next Board meeting."

Although no specific items were brought forth, Board members agreed to the
delegation of authority as stated.

President Imeson led off the discussion by expressing his
gratitude to Vice Chancellor Clark and her staff for their efforts on compiling
the Environmental Scan. (A full copy of the Environmental Scan is on file
in the Board's office.)

Indicating that the impetus for compiling a scan came from the System Strategic
Planning Committee, Vice Chancellor Clark said that it drew from available
information, including data developed by campuses, the OUS Office of
Institutional Research, and by other Chancellor's Office staff who worked
on the new budget model. "The purpose of the scan is to learn about the
environment in which we are operating, and our position within that environment,"
explained Dr. Clark.

Dr. Clark pointed out that overall diversity of students in OUS institutions
is increasing, not only in terms of ethnicity, but age, gender (woman are
attending in record numbers), and number of part-time students. Nationally,
college attendance patterns are less linear than expected. Recent literature
describes students "swirling" among various institutions. "It becomes very
difficult to talk about graduation and transfer rates in any simple way because
of the real complexity of the picture," she observed.

Briefly reviewing some of the economic indicators used in the study, Dr.
Clark remarked that the regional rural/urban divisions in Oregon continue
to affect overall economic health of the state. Some regions of Oregon thrive,
while others continue to languish.

Vice Chancellor Clark commended Academic Affairs staff Dr. Nancy Goldschmidt
and Ms. Vicki Falsgraf, and all Institutional Research staff for their
contributions to this project.

Dr. Goldschmidt said that a kind of industry analysis was implemented in
order to get a notion of the competition. Internal focus was placed on strengths
and limitations, while external focus was on opportunities and turbulence.

"The question now is, how do you respond?" said Dr. Goldschmidt. She described
three possible responses: (1) position--focus on the System's strengths,
(2) move strategically to improve position--create brand recognition, and
(3) exploit change--anticipate shifts before they occur.

Dr. Richmond, while saying the information was interesting, asked for a better
reference point or comparative figures with other states. Dr. Goldschmidt
noted that some comparisons are made with peer institutions. Continuing her
line of questioning, Dr. Richmond asked, "Are we lower than comparable states
in terms of the number of business degrees we award? Are our students more
or less educated in higher education than in other states? That's the kind
of information I was seeking."

Vice Chancellor Clark responded that the data were not in the report before
them, but that staff could try to obtain them.

Summarizing her report, Dr. Goldschmidt pointed out that peer institutions
had been used in recent reports, including the new budget model and faculty
compensation study, which is why that information was drawn upon once again.
"They will be used to compare outcomes, develop improvement targets, and
define best practices," observed Dr. Goldschmidt. "The definition of success
is changing for OUS. The old factors, including tight geographic boundaries,
are now loosening. Size used to be important while speed is now a priority."

Dr. Aschkenasy remarked that the statistics seem to indicate that humanities
are trending upward, while computer sciences and engineering are leaning
downward. Dr. Goldschmidt confirmed Director Aschkenasy's observation, noting
that the trend was being experienced nationally. Building on Dr. Aschkenasy's
thoughts, Dr. Richmond said, "The question really is, are Oregon students
who are interested in science and engineering disproportionately leaving
the state, or is it the national trend?"

Vice Chancellor Clark indicated data are not available that would precisely
answer that question. "We can't say that more science and engineering students
leave the state versus students with other interests." Reporting on OSU's
situation, President Risser said that engineering enrollment was up 12 percent
this fall and that it is the largest college at OSU, the second largest being
the College of Liberal Arts. "I don't see OSU as reflecting national trends
at all," Dr. Risser observed.

Posing some final policy questions for the Board's consideration at the upcoming
renewal work session, Vice Chancellor Clark asked the following:

Can we identify five or more of the critical challenges and opportunities
for us to address in light of these kinds of data in the Environmental
Scan?

When does differentiation or coordination contribute to the greater good
of the System?

What do you see as the areas of the market that we're not responding
to adequately with respect to preparation for employment?

Should we be engaging in macro-level planning about academic program
directions and the capital master planning so the facilities and infrastructure
follow the academic directions of the institutions in the fulfillment of
their missions?